Investing.com -- Gold inched up on Friday completing one of the strongest two-week rallies over the first six months of the year, as investors remained bullish on the precious metal while global bond yields and stocks continued to dip.
On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,267.00 and $1,280.85 an ounce before settling at $1,274.05, up 1.35 or 0.11% on the day. Gold has closed higher in three consecutive sessions and five of the last seven. At session highs, the precious metal cleared $1,280 for the first time in three weeks. Gold, which has surged nearly 20% in 2016, remains near 15-month highs at $1,300.
Gold likely gained support at $1,125.00, the low from February 3 and was met with resistance at $1,304.40, the high from May 2.
Investors continued to pile into safe-haven assets such as Gold, as government bond yields worldwide tumbled to fresh record lows. Yields on the Germany 10-Year fell as low as 0.02%, as more than 75% of German government bond yields hovered in negative territory. Throughout the euro zone, bond prices remained high as yields in the U.K, France,Italy and Spain provided unattractive options for investors. It came one day after Janus Capital's Bill Gross cautioned that a $10 trillion pile of negative yielding government bonds could amount to a "supernova that will explode one day."
In the last month alone, yields on each of the five aforementioned government bonds have plummeted at least 10 basis points. Since the start of last summer, German bund yields have crashed nearly 100 basis points, while yields on 10-year U.K. Gilts and France Oats have plunged approximately 90 basis points. In Japan, 10-Year government bond yields fell three basis points to Minus-0.17% on Friday. Over the last five months, Japanese 10-year bond yields have slumped more than 20 basis points since the Bank of Japan adopted a controversial negative interest rate policy in January.
Meanwhile, stocks in the euro zone fell sharply on Friday as concerns related to the German yield crush and an upcoming Brexit vote continued to fester. The German Dax plunged 2.52% to 9,834.62, while the broader Euro Stoxx 600 Index fell 2.3% in Friday's session, ending the week down by 2.4%. to 332.92. Earlier this week, the European Central Bank launched a comprehensive corporate bond buying program in its latest effort to bolster persistently sluggish inflation. On Thursday, ECB president Mario Draghi criticized top politicians for placing an undue burden on the central bank by delaying key fiscal reforms.
Across the Atlantic, the dollar extended Thursday's rally following a solid consumer sentiment report by the University of Michigan. In Friday's June flash report, Michigan's Consumer Survey Center said its consumer sentiment index fell by 0.4 to 94.3, remaining near one-year highs. Consumer sentiment has stabilized since May's robust flash report when the index soared nearly eight points, posting its best monthly reading in six years. At a closely-watched speech on Monday, Federal Reserve chair Janet Yellen credited a significant increase in consumer spending for helping bolster GDP growth expectations over the second quarter.
While the Federal Open Market Committee (FOMC) is not expected to raise short-term interest rates when it meets next week, Yellen has yet to rule out a summer interest rate hike. The FOMC has left the target range on its benchmark Federal Funds Rate at its current level between 0.25 and 0.50% at each of its three meetings this year.
Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed. Gold, which is not attached to interest rates, struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.35% to an intraday high of 94.46. The index is still down by more than 5% since early-December.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for July delivery gained 0.032 or 0.19% to $17.300 an ounce.
Copper for July delivery inched down 0.009 or 0.44% to $2.030 a pound.